PHP 1.19 trillion and still flooded: Philippines’ budget problem

The Philippines is handing PHP 1.19 trillion to local governments in 2026. That’s the biggest fiscal transfer in our history. Let that sink in.

Before the Mandanas-Garcia ruling, LGUs were getting around PHP 695 billion in 2021. A year later, it jumped to roughly PHP 960 billion. And now we’ve blown past the trillion-peso mark.

You’d think that kind of money would change things. It hasn’t — not the way it should.

People still wade through flooded streets every time it rains hard. Drainage projects sit unfinished. Farm-to-market roads stall halfway through construction. Barangay health stations and day care centers go up but don’t connect to any larger service network. Even at the national level, flood control spending — billions of it — keeps drawing scrutiny because, well, we’re still flooding.

The money’s there. It’s always been there. The problem is we don’t have the systems to put it to good use.

Here’s what that looks like in numbers. Say just 10% of that PHP 1.19 trillion — about PHP 119 billion — gets stuck in the pipeline. Unliquidated balances, procurement bottlenecks, the usual audit headaches. The drag on the economy? Somewhere between PHP 36 billion and PHP 119 billion in lost GDP activity. In a PHP 26 trillion economy, that shaves off up to 0.4 percentage points of growth. For a country trying to hit 6% to 7%, that’s not nothing.

And here’s the part nobody really wants to talk about: even if every single peso moved on schedule, it still wouldn’t guarantee transformation.

We scaled up local budgets way faster than we built the systems to handle them. Decentralization took off. Integration? That got left behind.

Look at how projects get funded. Drainage goes in without anyone checking watershed alignment. Roads get paved with no logistics plan behind them. Health facilities pop up but there’s no referral network tying them together. Flood control structures get installed with zero basin-wide modeling. Everything gets done in a silo.

The COA reports keep saying the same things year after year — unliquidated advances, missing documents, unreconciled balances. Those are transmission problems. Friction in how the money actually moves through the system.

But there’s a bigger issue underneath all of that. It’s not just that the money moves slowly. It’s that the projects don’t connect. You can spend every peso and still end up with a pile of disconnected outputs instead of a functioning system.

That’s exactly what the flood control mess is about. It’s not just the alleged irregularities. It’s what happens when you throw large sums at weak institutional plumbing. The budget grows. Contracts get signed. Resilience doesn’t.

Former Finance Secretary Benjamin Diokno made an interesting observation — a lot of LGUs are actually running surpluses while the national government runs deficits. Think about that. The money is there. Local governments just can’t absorb it fast enough.

So what do we actually do? Three things. First, clean up the backlog — settle the legacy balances, close the compliance gaps that keep showing up in audit after audit. Second, fix how the money flows — put forward controls in place, enforce liquidation timelines, make dashboards transparent. Third — and this is the hard one — build a real doctrine. Adopt frameworks that tie infrastructure to land use, climate resilience to economic sequencing. Stop planning in fragments.

The PHP 1.19 trillion National Tax Allotment this year is a once-in-a-generation window. But if we keep pouring money into a fragmented system, we’re just going to get more expensive fragmentation.

The bottleneck isn’t the budget anymore. It’s that we don’t have a doctrine for making budgets compound instead of scatter.

And until we fix that, we’ll keep raising the allocations — and keep wondering why the floods don’t stop.